form10q.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended    September 30, 2012   
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to _____________
 
Commission File
Number
  
Registrant; State of Incorporation;
Address and Telephone Number
  
IRS Employer
Identification No.
         
1-14764
  
Cablevision Systems Corporation
  
11-3415180
   
Delaware
    
   
1111 Stewart Avenue
    
   
Bethpage, New York  11714
    
   
(516) 803-2300
    
         
1-9046
  
CSC Holdings, LLC
  
27-0726696
   
Delaware
    
   
1111 Stewart Avenue
    
   
Bethpage, New York  11714
    
   
(516) 803-2300
    
 
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Cablevision Systems Corporation
Yes
x
  
No
 o
CSC Holdings, LLC
Yes
x
  
No
 o
 
Indicate by check mark whether the Registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files).
Yes x No o
 
 
 
 
 
Indicate by check mark whether each Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Exchange Act Rule 12b-2).

 
Large accelerated
filer
  
Accelerated
filer
  
Non-accelerated
filer
  
Smaller
Reporting
Company
Cablevision Systems Corporation
Yes
 x
No
 o  
Yes
 o
No
 x  
Yes
 o
No
x
  
Yes
 o
No
x
CSC Holdings, LLC
Yes
 o
No
x
  
Yes
 o
No
x
  
Yes
x
No
 o  
Yes
 o
No
x
 
Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Cablevision Systems Corporation
Yes
 o  
No
x
CSC Holdings, LLC
Yes
 o  
No
x
 
Number of shares of common stock outstanding as of October 31, 2012:

Cablevision NY Group Class A Common Stock   -
 209,022,272
Cablevision NY Group Class B Common Stock   -
 54,137,673
CSC Holdings, LLC Interests of Member  -
17,631,479
 
CSC Holdings, LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format applicable to CSC Holdings, LLC.
 
 
 
 
 
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

     
Page
PART I.
FINANCIAL INFORMATION
  
     
Item 1.
  
       
    Condensed Consolidated Balance Sheets - September 30, 2012 and December 31, 2011 (unaudited)
2
       
    Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)
4
       
    Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)
5
       
    Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2012 and 2011 (unaudited)
6
       
 
Financial Statements of CSC Holdings, LLC and Subsidiaries
  
       
 
 
 Condensed Consolidated Balance Sheets - September 30, 2012 and December 31, 2011 (unaudited)
7
       
    Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)
9
       
    Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2012 and 2011 (unaudited)
10
       
    Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2012 and 2011 (unaudited)
11
       
 
12
       
Item 2.
37
       
Item 3.
69
       
Item 4.
71
       
PART II.
OTHER INFORMATION
  
       
Item 1.
71
       
Item 2.
72
       
Item 6.
72
       
73
 
 
 
 
PART I.
FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q for the period ended September 30, 2012 is separately filed by Cablevision Systems Corporation ("Cablevision") and CSC Holdings, LLC ("CSC Holdings" and collectively with Cablevision and their subsidiaries, the "Company", "we", "us" or "our").

This Quarterly Report contains statements that constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995.  In this Quarterly Report there are statements concerning our future operating results and future financial performance.  Words such as "expects", "anticipates", "believes", "estimates", "may", "will", "should", "could", "potential", "continue", "intends", "plans" and similar words and terms used in the discussion of future operating results and future financial performance identify forward-looking statements.  Investors are cautioned that such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors.  Factors that may cause such differences to occur include, but are not limited to:
 
 
·
the level of our revenues;
 
 
·
competition for subscribers from existing competitors (such as telephone companies and direct broadcast satellite ("DBS") distributors) and new competitors (such as high-speed wireless providers) entering our franchise areas;
 
 
·
demand for our video, high-speed data and voice services, which is impacted by competition from other services and the other factors discussed herein;
 
 
·
industry conditions;
 
 
·
changes in the laws or regulations under which we operate;
 
 
·
the outcome of litigation and other proceedings, including the matters described in Note 13 of the combined notes to our condensed consolidated financial statements;
 
 
·
general economic conditions in the areas in which we operate;
 
 
·
the state of the market for debt securities and bank loans;
 
 
·
demand for advertising in our newspapers along with subscriber and single copy outlet sales demand for our newspapers;
 
 
·
the level of our capital expenditures;
 
 
·
the level of our operating expenses, including the cost of programming;
 
 
·
future acquisitions and dispositions of assets;
 
 
·
market demand for new services;
 
 
·
demand for advertising;
 
 
·
the tax-free treatment of the MSG Distribution and the AMC Networks Distribution (each as defined herein);
 
 
·
whether pending uncompleted transactions, if any, are completed on the terms and at the times set forth (if at all);
 
 
·
other risks and uncertainties inherent in the cable television, newspaper publishing businesses, and our other businesses;
 
 
·
financial community and rating agency perceptions of our business, operations, financial condition and the industries in which we operate; and
 
 
·
the factors described in our filings with the Securities and Exchange Commission, including under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein.
 
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.
 
 
1
 
Item 1.

CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
   
September 30,
2012
    
December 31,
2011
  
ASSETS
            
             
Current Assets:
            
             
Cash and cash equivalents
   $ 438,665     $ 611,947  
Restricted cash
     -       29,068  
Accounts receivable, trade (less allowance for doubtful accounts of $14,373 and $14,907)
     281,023       295,277  
Prepaid expenses and other current assets
     139,416       135,579  
Amounts due from affiliates
     2,946       6,818  
Deferred tax asset
     196,310       84,925  
Investment securities pledged as collateral
     384,127       191,338  
Total current assets
     1,442,487       1,354,952  
                 
Property, plant and equipment, net of accumulated depreciation of $9,526,384 and $9,221,694
     3,321,871       3,269,232  
Other receivables
     4,464       3,279  
Investment securities pledged as collateral
     384,127       317,896  
Derivative contracts
     6,157       18,617  
Other assets
     45,025       53,971  
Amortizable intangible assets, net of accumulated amortization of $155,326 and $115,043
     214,355       252,871  
Indefinite-lived cable television franchises
     1,240,228       1,240,228  
Other indefinite-lived intangible assets
     55,895       55,895  
Goodwill
     442,773       442,773  
Deferred financing costs, net of accumulated amortization of $88,950 and $81,182
     127,924       133,611  
    $ 7,285,306     $ 7,143,325  

See accompanying combined notes to condensed consolidated financial statements.
 
 
2
 
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Cont'd)
(In thousands, except per share amounts)
(Unaudited)
 
   
September 30,
2012
    
December 31,
2011
  
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
            
             
Current Liabilities:
            
             
Accounts payable
   $ 426,713     $ 455,654  
Accrued liabilities
     495,540       604,240  
Amounts due to affiliates
     34,650       32,682  
Deferred revenue
     54,634       61,599  
Liabilities under derivative contracts
     91,863       75,223  
Credit facility debt
     152,354       103,245  
Collateralized indebtedness
     246,464       148,175  
Capital lease obligations
     14,490       9,174  
Notes payable
     11,029       17,614  
Senior notes
     -       87,822  
Total current liabilities
     1,527,737       1,595,428  
                 
Deferred revenue
     9,468       10,896  
Liabilities under derivative contracts
     32,492       3,141  
Other liabilities
     270,160       220,865  
Deferred tax liability
     273,207       80,546  
Credit facility debt
     4,806,683       5,080,949  
Collateralized indebtedness
     309,687       307,763  
Capital lease obligations
     47,922       33,589  
Notes payable
     1,982       11,613  
Senior notes and debentures
     5,736,032       5,358,838  
Total liabilities
     13,015,370       12,703,628  
                 
Commitments and contingencies
                
                 
Redeemable noncontrolling interests
     14,351       13,761  
                 
Stockholders' Deficiency:
                
Preferred Stock, $.01 par value, 50,000,000 shares authorized, none issued
     -       -  
CNYG Class A common stock, $.01 par value, 800,000,000 shares authorized, 286,042,816 and 281,833,547 shares issued and 208,969,092 and 220,170,261 shares outstanding
     2,860       2,818  
CNYG Class B common stock, $.01 par value, 320,000,000 shares authorized, 54,137,673 shares issued and outstanding
     541       541  
RMG Class A common stock, $.01 par value, 600,000,000 shares authorized, none issued
     -       -  
RMG Class B common stock, $.01 par value, 160,000,000 shares authorized, none issued
     -       -  
Paid-in capital
     973,112       1,051,435  
Accumulated deficit
     (5,128,498 )     (5,245,483 )
      (4,151,985 )     (4,190,689 )
Treasury stock, at cost (77,073,724 and 61,663,286 CNYG Class A common shares)
     (1,572,133 )     (1,363,698 )
Accumulated other comprehensive loss
     (21,166 )     (21,468 )
Total stockholders' deficiency
     (5,745,284 )     (5,575,855 )
Noncontrolling interest
     869       1,791  
Total deficiency
     (5,744,415 )     (5,574,064 )
    $ 7,285,306     $ 7,143,325  

See accompanying combined notes to condensed consolidated financial statements.
 
 
3
 
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 2012 and 2011
(In thousands, except per share amounts)
(Unaudited)
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Revenues, net (including revenues, net from affiliates of $870, $1,142, $4,391, and $3,315, respectively)
   $ 1,685,443     $ 1,665,790     $ 5,041,488     $ 5,009,595  
                                 
Operating expenses:
                                
Technical and operating (excluding depreciation, amortization and impairments shown below and including charges from affiliates of $46,476, $45,075, $138,781, and $134,330, respectively)
     816,253       766,205       2,410,932       2,249,921  
Selling, general and administrative (including charges from (net of charges to) affiliates of $1,112, $(3,543), $644, and $(13,713), respectively)
     379,119       370,610       1,118,723       1,127,607  
Restructuring expense (credits)
     330       27       (61 )     292  
Depreciation and amortization (including impairments)
     269,931       256,545       781,681       749,333  
      1,465,633       1,393,387       4,311,275       4,127,153  
Operating income
     219,810       272,403       730,213       882,442  
                                 
Other income (expense):
                                
Interest expense, net
     (182,951 )     (182,298 )     (546,099 )     (561,677 )
Gain (loss) on investments, net
     81,619       (95,362 )     259,057       (22,978 )
Gain (loss) on equity derivative contracts, net
     (57,082 )     81,737       (184,413 )     38,856  
Gain (loss) on interest rate swap contracts, net
     -       1,173       (1,828 )     (8,513 )
Loss on extinguishment of debt and write-off of deferred financing costs
     (61,052 )     (3,027 )     (61,052 )     (3,027 )
Miscellaneous, net
     474       275       1,279       730  
      (218,992 )     (197,502 )     (533,056 )     (556,609 )
Income from continuing operations before income taxes
     818       74,901       197,157       325,833  
Income tax expense
     (4,682 )     (35,297 )     (80,128 )     (147,676 )
Income (loss) from continuing operations
     (3,864 )     39,604       117,029       178,157  
Income from discontinued operations, net of income taxes
     -       -       -       53,623  
Net income (loss)
     (3,864 )     39,604       117,029       231,780  
Net loss (income) attributable to noncontrolling interests
     73       (285 )     (44 )     (552 )
Net income (loss) attributable to Cablevision Systems Corporation stockholders
   $ (3,791 )   $ 39,319     $ 116,985     $ 231,228  
                                 
Basic net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
                                
                                 
Income (loss) from continuing operations
   $ (0.01 )   $ 0.14     $ 0.44     $ 0.64  
                                 
Income from discontinued operations
   $ -     $ -     $ -     $ 0.19  
                                 
Net income (loss)
   $ (0.01 )   $ 0.14     $ 0.44     $ 0.83  
                                 
Basic weighted average common shares (in thousands)
     259,905       275,145       263,570       278,498  
                                 
Diluted net income (loss) per share attributable to Cablevision Systems Corporation stockholders:
                                
                                 
Income (loss) from continuing operations
   $ (0.01 )   $ 0.14     $ 0.44     $ 0.62  
                                 
Income from discontinued operations
   $ -     $ -     $ -     $ 0.19  
                                 
Net income (loss)
   $ (0.01 )   $ 0.14     $ 0.44     $ 0.81  
                                 
Diluted weighted average common shares (in thousands)
     259,905       284,113       268,704       287,137  
Amounts attributable to Cablevision Systems Corporation stockholders:
                                
Income (loss) from continuing operations, net of income taxes
   $ (3,791 )   $ 39,319     $ 116,985     $ 177,605  
Income from discontinued operations, net of income taxes
     -       -       -       53,623  
Net income (loss)
   $ (3,791 )   $ 39,319     $ 116,985     $ 231,228  
Cash dividends declared per share of common stock
   $ 0.15     $ 0.15     $ 0.45     $ 0.425  

See accompanying combined notes to condensed consolidated financial statements.
 
 
4
 
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three and Nine Months Ended September 30, 2012 and 2011
(In thousands)
(Unaudited)
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2012
    
2011
    
2012
    
2011
  
                         
Net income (loss)
   $ (3,864 )   $ 39,604     $ 117,029     $ 231,780  
                                 
Other comprehensive income (loss), net of tax:
                                
Defined benefit pension plans and postretirement plans:
                                
Amortization of actuarial losses, net
     100       219       302       918  
Unrecognized loss arising during period
     -       -       -       (744 )
Comprehensive income (loss)
     (3,764 )     39,823       117,331       231,954  
Comprehensive loss (income) attributable to noncontrolling interests
     73       (285 )     (44 )     (552 )
Comprehensive income (loss) attributable to Cablevision Systems Corporation stockholders
   $ (3,691 )   $ 39,538     $ 117,287     $ 231,402  

See accompanying combined notes to condensed consolidated financial statements.
 
 
5
 
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2012 and 2011
(In thousands)
(Unaudited)
 
   
2012
    
2011
  
Cash flows from operating activities:
            
Income from continuing operations
   $ 117,029     $ 178,157  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
                
Depreciation and amortization (including impairments)
     781,681       749,333  
Loss (gain) on investments, net
     (259,057 )     22,978  
Loss (gain) on equity derivative contracts, net
     184,413       (38,856 )
Loss on extinguishment of debt and write-off of deferred financing costs
     61,052       3,027  
Amortization of deferred financing costs and discounts on indebtedness
     32,577       35,065  
Share-based compensation expense related to equity classified awards
     37,802       36,585  
Deferred income taxes
     81,254       119,675  
Provision for doubtful accounts
     38,857       43,872  
Changes in other assets and liabilities
     (110,241 )     (135,126 )
Net cash provided by operating activities
     965,367       1,014,710  
                 
Cash flows from investing activities:
                
Capital expenditures
     (809,243 )     (574,478 )
Proceeds (payments) related to sale of equipment, net of costs of disposal
     1,371       (1,242 )
Payments for acquisitions, net
     -       (7,776 )
Decrease in investment securities and other investments
     -       30  
Decrease in restricted cash
     1,147       -  
Additions to other intangible assets
     (3,813 )     (10,500 )
Net cash used in investing activities
     (810,538 )     (593,966 )
                 
Cash flows from financing activities:
                
Proceeds from credit facility debt
     -       605,000  
Repayment of credit facility debt
     (225,916 )     (168,089 )
Proceeds from issuance of senior notes
     750,000       -  
Repayment and repurchase of senior notes, including tender premiums and fees
     (530,749 )     (390,696 )
Proceeds from collateralized indebtedness
     248,388       246,464  
Repayment of collateralized indebtedness and related derivative contracts
     (218,754 )     (210,584 )
Proceeds from stock option exercises
     7,746       6,163  
Dividend distributions to common stockholders
     (125,228 )     (120,918 )
Principal payments on capital lease obligations
     (7,886 )     (2,567 )
Deemed repurchases of restricted stock
     (19,831 )     (32,968 )
Purchase of shares of CNYG Class A common stock, pursuant to a share repurchase program, held as treasury shares
     (188,600 )     (488,408 )
Additions to deferred financing costs
     (15,813 )     (440 )
Distributions to noncontrolling interests, net
     (1,396 )     (1,127 )
Net cash used in financing activities
     (328,039 )     (558,170 )
                 
Net decrease in cash and cash equivalents from continuing operations
     (173,210 )     (137,426 )
                 
Cash flows of discontinued operations:
                
Net cash provided by (used in) operating activities
     (72 )     131,158  
Net cash used in investing activities
     -       (4,086 )
Net cash provided by financing activities
     -       2,857  
Effect of change in cash related to discontinued operations
     -       (117,877 )
Net increase (decrease) in cash and cash equivalents from discontinued operations
     (72 )     12,052  
                 
Cash and cash equivalents at beginning of year
     611,947       313,991  
                 
Cash and cash equivalents at end of period
   $ 438,665     $ 188,617  

See accompanying combined notes to condensed consolidated financial statements.
 
 
6
 
CSC HOLDINGS, LLC AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
   
September 30,
2012
    
December 31,
2011
  
ASSETS
            
             
Current Assets:
            
             
Cash and cash equivalents
   $ 400,748     $ 611,054  
Restricted cash
     -       29,068  
Accounts receivable, trade (less allowance for doubtful accounts of $14,373 and $14,907)
     281,023       295,277  
Prepaid expenses and other current assets
     135,113       129,282  
Amounts due from affiliates (primarily due from Cablevision)
     482,939       503,576  
Deferred tax asset
     11,528       91,372  
Investment securities pledged as collateral
     384,127       191,338  
Total current assets
     1,695,478       1,850,967  
                 
Property, plant and equipment, net of accumulated depreciation of $9,526,384 and $9,221,694
     3,321,871       3,269,232  
Other receivables
     2,686       3,279  
Investment securities pledged as collateral
     384,127       317,896  
Derivative contracts
     6,157       18,617  
Other assets
     45,025       53,971  
Amortizable intangible assets, net of accumulated amortization of $155,326 and $115,043
     214,355       252,871  
Indefinite-lived cable television franchises
     1,240,228       1,240,228  
Other indefinite-lived intangible assets
     55,895       55,895  
Goodwill
     442,773       442,773  
Deferred financing costs, net of accumulated amortization of $77,422 and $72,577
     77,297       96,056  
    $ 7,485,892     $ 7,601,785  

See accompanying combined notes to condensed consolidated financial statements.
 
 
7
 
CSC HOLDINGS, LLC AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS (Cont'd)
(In thousands)
(Unaudited)
 
   
September 30,
2012
    
December 31,
2011
  
LIABILITIES AND MEMBER'S DEFICIENCY
            
             
Current Liabilities:
            
             
Accounts payable
   $ 426,713     $ 455,654  
Accrued liabilities
     442,203       554,050  
Amounts due to affiliates
     34,650       30,065  
Deferred revenue
     54,634       61,599  
Liabilities under derivative contracts
     91,863       75,223  
Credit facility debt
     152,354       103,245  
Collateralized indebtedness
     246,464       148,175  
Capital lease obligations
     14,490       9,174  
Notes payable
     11,029       17,614  
Senior notes
     -       60,997  
Total current liabilities
     1,474,400       1,515,796  
                 
Deferred revenue
     9,468       10,896  
Liabilities under derivative contracts
     32,492       3,141  
Other liabilities
     268,080       218,312  
Deferred tax liability
     623,095       600,420  
Credit facility debt
     4,806,683       5,080,949  
Collateralized indebtedness
     309,687       307,763  
Capital lease obligations
     47,922       33,589  
Notes payable
     1,982       11,613  
Senior notes and debentures
     2,844,859       3,218,697  
Total liabilities
     10,418,668       11,001,176  
                 
Commitments and contingencies
                
                 
Redeemable noncontrolling interests
     14,351       13,761  
                 
Member's Deficiency:
                
Accumulated deficit
     (3,267,095 )     (3,492,409 )
Senior notes due from Cablevision
     (753,717 )     (753,717 )
Other member's equity (17,631,479 and 14,432,750 membership units issued and outstanding)
     1,093,982       852,651  
      (2,926,830 )     (3,393,475 )
Accumulated other comprehensive loss
     (21,166 )     (21,468 )
Total member's deficiency
     (2,947,996 )     (3,414,943 )
Noncontrolling interest
     869       1,791  
Total deficiency
     (2,947,127 )     (3,413,152 )
    $ 7,485,892     $ 7,601,785  

See accompanying combined notes to condensed consolidated financial statements.
 
 
8
 
CSC HOLDINGS, LLC AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 2012 and 2011
(In thousands)
(Unaudited)
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Revenues, net (including revenues, net from affiliates of $870, $1,142, $4,391, and $3,315, respectively)
   $ 1,685,443     $ 1,665,790     $ 5,041,488     $ 5,009,595  
                                 
Operating expenses:
                                
Technical and operating (excluding depreciation, amortization and impairments shown below and including charges from affiliates of $46,476, $45,075, $138,781, and $134,330, respectively)
     816,253       766,205       2,410,932       2,249,921  
Selling, general and administrative (including charges from (net of charges to) affiliates of $1,112, $(3,543), $644, and $(13,713), respectively)
     379,119       370,610       1,118,723       1,127,607  
Restructuring expense (credits)
     330       27       (61 )     292  
Depreciation and amortization (including impairments)
     269,931       256,545       781,681       749,333  
      1,465,633       1,393,387       4,311,275       4,127,153  
Operating income
     219,810       272,403       730,213       882,442  
                                 
Other income (expense):
                                
Interest expense
     (137,144 )     (136,683 )     (409,380 )     (424,635 )
Interest income
     14,940       15,035       45,001       44,834  
Gain (loss) on investments, net
     81,619       (95,362 )     259,057       (22,978 )
Gain (loss) on equity derivative contracts, net
     (57,082 )     81,737       (184,413 )     38,856  
Gain (loss) on interest rate swap contracts, net
     -       1,173       (1,828 )     (8,513 )
Loss on extinguishment of debt and write-off of deferred financing costs
     (61,052 )     (3,027 )     (61,052 )     (3,027 )
Miscellaneous, net
     474       275       1,279       730  
      (158,245 )     (136,852 )     (351,336 )     (374,733 )
Income from continuing operations before income taxes
     61,565       135,551       378,877       507,709  
Income tax expense
     (27,144 )     (62,123 )     (153,519 )     (231,237 )
Income from continuing operations
     34,421       73,428       225,358       276,472  
Income from discontinued operations, net of income taxes
     -       -       -       53,623  
Net income
     34,421       73,428       225,358       330,095  
Net loss (income) attributable to noncontrolling interests
     73       (285 )     (44 )     (552 )
Net income attributable to CSC Holdings, LLC's sole member
   $ 34,494     $ 73,143     $ 225,314     $ 329,543  
                                 
Amounts attributable to CSC Holdings, LLC's sole member:
                                
Income from continuing operations, net of income taxes
   $ 34,494     $ 73,143     $ 225,314     $ 275,920  
Income from discontinued operations, net of income taxes
     -       -       -       53,623  
Net income
   $ 34,494     $ 73,143     $ 225,314     $ 329,543  

See accompanying combined notes to condensed consolidated financial statements.
 
 
9
 
CSC HOLDINGS, LLC AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Nine Months Ended September 30, 2012 and 2011
(In thousands)
(Unaudited)
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2012
    
2011
    
2012
    
2011
  
                         
Net income
   $ 34,421     $ 73,428     $ 225,358     $ 330,095  
                                 
Other comprehensive income, net of tax:
                                
Defined benefit pension plans and postretirement plans:
                                
Amortization of actuarial losses, net
     100       219       302       918  
Unrecognized loss arising during period
     -       -       -       (744 )
Comprehensive income
     34,521       73,647       225,660       330,269  
Comprehensive loss (income) attributable to noncontrolling interests
     73       (285 )     (44 )     (552 )
Comprehensive income  attributable to CSC Holdings, LLC's sole member
   $ 34,594     $ 73,362     $ 225,616     $ 329,717  

See accompanying combined notes to condensed consolidated financial statements.
 
 
10

CSC HOLDINGS, LLC AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2012 and 2011
(In thousands)
(Unaudited)
   
2012
    
2011
  
Cash flows from operating activities:
            
Income from continuing operations
   $ 225,358     $ 276,472  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
                
Depreciation and amortization (including impairments)
     781,681       749,333  
Loss (gain) on investments, net
     (259,057 )     22,978  
Loss (gain) on equity derivative contracts, net
     184,413       (38,856 )
Loss on extinguishment of debt and write-off of deferred financing costs
     61,052       3,027  
Amortization of deferred financing costs and discounts on indebtedness
     28,055       30,925  
Share-based compensation expense related to equity classified awards
     37,802       36,585  
Deferred income taxes
     117,223       192,736  
Provision for doubtful accounts
     38,857       43,872  
Excess tax benefit on share-based awards
     (21,292 )     (7,901 )
Changes in other assets and liabilities
     (85,290 )     (150,185 )
Net cash provided by operating activities
     1,108,802       1,158,986  
                 
Cash flows from investing activities:
                
Capital expenditures
     (809,243 )     (574,478 )
Proceeds (payments) related to sale of equipment, net of costs of disposal
     1,371       (1,242 )
Payments for acquisitions, net
     -       (7,776 )
Decrease in investment securities and other investments
     -       30  
Decrease in restricted cash
     1,147       -  
Additions to other intangible assets
     (3,813 )     (10,500 )
Net cash used in investing activities
     (810,538 )     (593,966 )
                 
Cash flows from financing activities:
                
Proceeds from credit facility debt
     -       605,000  
Repayment of credit facility debt
     (225,916 )     (168,089 )
Repayment and repurchase of senior notes, including tender premiums and fees
     (503,924 )     (390,696 )
Proceeds from collateralized indebtedness
     248,388       246,464  
Repayment of collateralized indebtedness and related derivative contracts
     (218,754 )     (210,584 )
Capital contributions from Cablevision
     735,000       -  
Distributions to Cablevision
     (554,564 )     (744,536 )
Excess tax benefit on share-based awards
     21,292       7,901  
Principal payments on capital lease obligations
     (7,886 )     (2,567 )
Additions to deferred financing costs
     (738 )     (440 )
Distributions to noncontrolling interests, net
     (1,396 )     (1,127 )
Net cash used in financing activities
     (508,498 )     (658,674 )
Net decrease in cash and cash equivalents from continuing operations
     (210,234 )     (93,654 )
                 
Cash flows of discontinued operations:
                
Net cash provided by (used in) operating activities
     (72 )     131,158  
Net cash used in investing activities
     -       (4,086 )
Net cash provided by financing activities
     -       2,857  
Effect of change in cash related to discontinued operations
     -       (117,877 )
Net increase (decrease) in cash and cash equivalents from discontinued operations
     (72 )     12,052  
Cash and cash equivalents at beginning of year
     611,054       266,914  
Cash and cash equivalents at end of period
   $ 400,748     $ 185,312  
 
See accompanying combined notes to condensed consolidated financial statements.
 
 
11
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 
NOTE 1.
BUSINESS

Cablevision Systems Corporation ("Cablevision"), its wholly-owned subsidiary CSC Holdings, LLC ("CSC Holdings," and collectively with Cablevision, the "Company") and their subsidiaries own and operate cable television systems and own companies that provide regional news, local programming and advertising sales services for the cable television industry, provide commercial data and voice services, operate motion picture theatres and operate a newspaper publishing business.  The Company classifies its operations into two reportable segments:  (1) Telecommunications Services, consisting principally of its video, high-speed data, Voice over Internet Protocol ("VoIP") and its commercial data and voice services operations; and (2) Other, consisting principally of (i) Newsday, which includes the Newsday daily newspaper, amNew York, Star Community Publishing Group, and online websites including newsday.com and exploreLI.com, (ii) a motion picture theatre business ("Clearview Cinemas"), (iii) the News 12 Networks, which provide regional news programming services, (iv) the MSG Varsity network, a network dedicated entirely to showcasing high school sports and activities, (v) a cable television advertising company, Cablevision Media Sales Corporation ("Cablevision Media Sales"), and (vi) certain other businesses and unallocated corporate costs.

On June 30, 2011, Cablevision distributed to its stockholders all of the outstanding common stock of AMC Networks Inc. ("AMC Networks"), a company which consists principally of national programming networks, including AMC, WE tv, IFC and Sundance Channel, previously owned and operated by the Company's Rainbow segment (the "AMC Networks Distribution").  As a result of the AMC Networks Distribution, the Company no longer consolidates the financial results of AMC Networks for the purpose of its own financial reporting and the historical financial results of AMC Networks have been reflected in the Company's condensed consolidated financial statements as discontinued operations for the nine months ended September 30, 2011.  Accounts payable to and advances to AMC Networks that were previously eliminated in consolidation are now presented as amounts due to affiliates or amounts due from affiliates on the Company's condensed consolidated balance sheets.

NOTE 2.
BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Cablevision and CSC Holdings have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information.  Accordingly, these financial statements do not include all the information and notes required for complete annual financial statements.

The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

The financial statements as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 presented in this Form 10-Q are unaudited; however, in the opinion of management, such financial statements include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.
 
 
12
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
The accompanying condensed consolidated financial statements of Cablevision include the accounts of Cablevision and its majority-owned subsidiaries and the accompanying condensed consolidated financial statements of CSC Holdings include the accounts of CSC Holdings and its majority-owned subsidiaries. Cablevision has no business operations independent of its CSC Holdings subsidiary, whose operating results and financial position are consolidated into Cablevision.  The condensed consolidated balance sheets and statements of operations of Cablevision are essentially identical to the condensed consolidated balance sheets and statements of operations for CSC Holdings, with the following significant exceptions:  Cablevision has $2,891,173 of senior notes outstanding at September 30, 2012 (excluding the $753,717 aggregate principal amount of Cablevision notes held by its subsidiary Newsday Holdings LLC) that were issued to third party investors, cash, deferred financing costs and accrued interest related to its senior notes, deferred taxes and accrued dividends on its balance sheet and CSC Holdings and its subsidiaries have certain intercompany receivables from Cablevision.  Differences between Cablevision's results of operations from those of CSC Holdings primarily include incremental interest expense, interest income, and income tax expense.  CSC Holdings' results of operations include incremental interest income from the Cablevision senior notes held by Newsday Holdings LLC, which is eliminated in Cablevision's results of operations.

The combined notes to the condensed consolidated financial statements relate to the Company, which, except as noted, are essentially identical for Cablevision and CSC Holdings.  All significant intercompany transactions and balances between Cablevision and CSC Holdings and their respective consolidated subsidiaries are eliminated in both sets of condensed consolidated financial statements.  Intercompany transactions between Cablevision and CSC Holdings do not eliminate in the CSC Holdings condensed consolidated financial statements, but do eliminate in the Cablevision condensed consolidated financial statements.

The results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2012.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08, Intangibles - Goodwill and Other (Topic 350):  Testing Goodwill for Impairment.  ASU No. 2011-08 is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a "qualitative" assessment to determine whether further impairment testing is necessary.  Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business).  The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value.  ASU No. 2011-08 was effective for the Company on January 1, 2012 and the Company adopted this guidance in connection with its annual goodwill impairment test performed in the first quarter of 2012.  The adoption of ASU No. 2011-08 had no impact on the financial statements of the Company as of September 30, 2012.
 
 
13
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820):  Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  ASU No. 2011-04 provides amendments to Topic 820 that change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements.  Provisions of the amendment include a requirement that for recurring Level III fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements.  In addition, for items not carried at fair value but for which fair value is disclosed, entities are required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed.  The adoption of ASU No. 2011-04 by the Company on January 1, 2012 had no impact on the Company's fair value measurements, financial position, results of operations or cash flows, however additional disclosures are included in Note 10.

Reclassifications

Certain reclassifications have been made to the 2011 financial statements to conform to the 2012 presentation.

NOTE 3.
DIVIDENDS

During the nine months ended September 30, 2012, the Board of Directors of Cablevision declared the following cash dividends to stockholders of record on both its Cablevision NY Group ("CNYG") Class A common stock and CNYG Class B common stock:

Declaration Date
  
Dividend Per Share
  
Record Date
  
Payment Date
  
               
February 22, 2012
   $0.15  
March 9, 2012
  
March 30, 2012
  
May 1, 2012
   $0.15  
May 17, 2012
  
June 1, 2012
  
August 1, 2012
   $0.15  
August 14, 2012
  
September 4, 2012
  

Cablevision paid dividends aggregating $125,228 during the nine months ended September 30, 2012, primarily from the proceeds of equity distribution payments from CSC Holdings.  In addition, as of September 30, 2012, up to approximately $4,998 will be paid when, and if, restrictions lapse on restricted shares outstanding.

During the nine months ended September 30, 2012, CSC Holdings made equity distribution payments to Cablevision aggregating $554,564.  These distribution payments were funded from cash on hand and cash from operations.  The proceeds were used to fund:
 
 
·
Cablevision's dividends paid;
 
 
·
Cablevision's interest and principal payments on its senior notes;
 
 
·
Cablevision's payments for the acquisition of treasury shares related to statutory minimum tax withholding obligations upon the vesting of certain restricted shares; and
 
 
·
the repurchase of CNYG Class A common stock under Cablevision's share repurchase program.
 
 
14
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
NOTE 4.
NET INCOME PER SHARE ATTRIBUTABLE TO STOCKHOLDERS

Cablevision

Basic net income per common share attributable to Cablevision stockholders is computed by dividing net income attributable to Cablevision stockholders by the weighted average number of common shares outstanding during the period.  Diluted net income per common share attributable to Cablevision stockholders reflects the dilutive effects of stock options and restricted stock (including shares held by AMC Networks and The Madison Square Garden Company ("Madison Square Garden") employees).

A reconciliation of the denominator of the basic and diluted net income per share attributable to Cablevision stockholders calculation for the nine months ended September 30, 2012 and for the three and nine months ended September 30, 2011 is as follows:

   
Nine Months
    
Three Months
    
Nine Months
  
   
Ended
September 30, 2012
    
Ended
September 30, 2011
  
   
(in thousands)
  
                   
Basic weighted average shares outstanding
     263,570       275,145       278,498  
                         
Effect of dilution:
                        
Stock options
     2,691       3,485       3,385  
Restricted stock awards
     2,443       5,483       5,254  
Diluted weighted average shares outstanding
     268,704       284,113       287,137  

Anti-dilutive shares (options whose exercise price exceeds the average market price of Cablevision's common stock during the period and certain restricted shares) totaling approximately 1,249,000 shares (which include Company options held by AMC Networks and Madison Square Garden employees), have been excluded from diluted weighted average shares outstanding for the nine months ended September 30, 2012.  For the three and nine months ended September 30, 2011, anti-dilutive shares totaling approximately 100,000 and 41,145 shares (which include Company options held by AMC Networks and Madison Square Garden employees), have been excluded from diluted weighted average shares outstanding, respectively.  In addition, approximately 756,000 restricted shares for the nine months ended September 30, 2012, and 308,900 and 913,400 for the three and nine months ended September 30, 2011, and approximately 12,222,000 options for the nine months ended September 30, 2012, issued pursuant to the Company's employee stock plan have also been excluded from the diluted weighted average shares outstanding for the respective periods, as the performance criteria on these awards have not yet been satisfied.

Since Cablevision generated a loss from continuing operations for the three months ended September 30, 2012, the outstanding common stock equivalents were excluded from the computation of net loss per share as the impact would have been anti-dilutive.

CSC Holdings

Net income per membership unit for CSC Holdings is not presented since CSC Holdings is a limited liability company and a wholly-owned subsidiary of Cablevision.

NOTE 5.
GROSS VERSUS NET REVENUE RECOGNITION

In the normal course of business, the Company is assessed non-income related taxes by governmental authorities, including franchising authorities, and collects such taxes from its customers.  The Company's policy is that, in instances where the tax is being assessed directly on the Company, amounts paid to the governmental authorities and amounts received from the customers are recorded on a gross basis.  That is, amounts paid to the governmental authorities are recorded as technical and operating expenses and amounts received from the customer are recorded as revenues.  For the three and nine months ended September 30, 2012 and 2011, the amount of franchise fees included as a component of net revenue aggregated $36,375 and $109,703 and $36,756 and $110,716, respectively.
 
 
15
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
NOTE 6.
SUPPLEMENTAL CASH FLOW INFORMATION

The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the fund purchases these securities to be cash equivalents.  The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.

During the nine months ended September 30, 2012 and 2011, the Company's non-cash investing and financing activities and other supplemental data were as follows:

   
Nine Months Ended
September 30,
  
   
2012
    
2011
  
Non-Cash Investing and Financing Activities of Cablevision and CSC Holdings:
            
             
Continuing Operations:
            
Capital lease obligations
   $ 27,542     $ 5,081  
Intangible asset obligations
     1,766       7,617  
Satisfaction and discharge of debt with AMC Networks debt
     -       1,250,000  
Distribution of AMC Networks (Cablevision)
     -       1,103,553  
Distribution of AMC Networks (CSC Holdings)
     -       1,177,782  
Property and equipment accrued but unpaid
     35,789       25,408  
                 
Non-Cash Investing and Financing Activities of Cablevision:
                
Dividends payable on unvested restricted share awards
     2,434       3,332  
                 
Supplemental Data:
                
Continuing Operations:
                
Cash interest paid (Cablevision)
     535,757       533,999  
Cash interest paid (CSC Holdings)
     407,984       406,221  
Income taxes paid, net (Cablevision)
     8,189       28,036  
Income taxes paid, net (CSC Holdings)
     8,208       28,036  
Discontinued Operations:
                
Cash interest paid (Cablevision and CSC Holdings)
     -       51,629  
Income taxes paid, net (Cablevision and CSC Holdings)
     -       5,573  

NOTE 7.
DISCONTINUED OPERATIONS

On June 30, 2011, the Company completed the AMC Networks Distribution (see Note 1).  As a result, the operating results of the Company's Rainbow segment through the date of the AMC Networks Distribution, as well as transaction costs, have been classified in the condensed consolidated statements of operations as discontinued operations through the distribution date.  Operating results of discontinued operations for the nine months ended September 30, 2011 are summarized below:
 
 
16
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
   
Nine Months Ended
September 30, 2011
  
       
Revenues, net of eliminations
   $ 551,480  
         
Income before income taxes
   $ 115,015  
Income tax expense(a)
     (61,392 )
Income from discontinued operations, net of income taxes
   $ 53,623  
 
(a)
In connection with the AMC Networks Distribution, the Company recorded income tax expense of $6,406 resulting from the non-deductibility of certain transaction costs and $3,969 resulting from the recognition of a deferred tax gain.

AMC Networks' results of operations reported on a stand-alone basis will differ from results presented above due to certain reclassifications and adjustments made for purposes of discontinued operations reporting.

NOTE 8.
DEBT

Issuance of Debt Securities

Cablevision 5-7/8% Senior Notes Due 2022

In September 2012, Cablevision issued $750,000 aggregate principal amount of 5-7/8% senior notes due September 15, 2022 (the "2022 Notes") in a registered public offering.  The 2022 Notes are senior unsecured obligations and rank equally in right of payment with all of Cablevision's other existing and future unsecured and unsubordinated indebtedness.  Cablevision may redeem all or a portion of the 2022 Notes at any time at a price equal to 100% of the principal amount of the 2022 Notes redeemed plus accrued and unpaid interest to the redemption date plus a "make whole" premium.  In September 2012, Cablevision contributed the net proceeds of approximately $735,000 from the issuance of the 2022 Notes to CSC Holdings, and CSC Holdings used those proceeds to (i) repurchase a portion of the 8-1/2% CSC Holdings Senior Notes Due June 2015 ("June 2015 Notes") and a portion of the 8-1/2% CSC Holdings Senior Notes Due April 2014 ("April 2014 Notes") in the tender offers commenced in September 2012 discussed below, (ii) make a $150,000 pre-payment on the CSC Holdings Term B-2 extended loan facility, and (iii) for general corporate purposes.  In connection with the issuance of the 2022 Notes, Cablevision incurred deferred financing costs of approximately $16,563, which are being amortized to interest expense over the term of the 2022 Notes.
 
Tender Offers for Debt (tender prices, premiums and principal amounts per note in dollars)

CSC Holdings

In September 2012, CSC Holdings commenced a cash tender offer for (1) its outstanding $120,543 aggregate principal amount of June 2015 Notes for total consideration of $1,046.25 per $1,000 principal amount of notes tendered for purchase, consisting of tender offer consideration of $1,016.25 per $1,000 principal amount of notes plus an early tender premium of $30 per $1,000 principal amount of notes and (2) its outstanding $575,633 aggregate principal amount of April 2014 Notes for total consideration of $1,113 per $1,000 principal amount of notes tendered for purchase, consisting of tender offer consideration of $1,083 per $1,000 principal amount of notes plus an early tender premium of $30 per $1,000 principal amount of notes.  Holders that tendered their securities by September 26, 2012 ("Early Tender Date") received the total consideration.  Holders who tendered their securities after such time and by the October 11, 2012 expiration date ("Tender Expiration Date") received the tender offer consideration, which is the total consideration less the early tender premium.
 
 
17
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
The aggregate principal amount of the June 2015 Notes and April 2014 Notes that were tendered and repurchased on September 27, 2012 amounted to $29,000 and $370,696, respectively.  There were no additional securities tendered between the Early Tender Date and the Tender Expiration Date.  The tender premiums associated with the repurchase of the June 2015 Notes and April 2014 Notes of approximately $43,231, along with other transaction costs of approximately $500, have been recorded in loss on extinguishment of debt in the condensed consolidated statements of operations for the three and nine months ended September 30, 2012.  In addition, unamortized deferred financing costs and discounts related to these notes aggregating approximately $16,997 were written-off in the quarter ended September 30, 2012.
 
NOTE 9.
DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

To manage interest rate risk, the Company has historically entered into interest rate swap contracts to adjust the proportion of total debt subject to variable interest rates.  Such contracts effectively fix the borrowing rates on floating rate debt to limit the exposure against the risk of rising rates.  The Company does not enter into interest rate swap contracts for speculative or trading purposes.

During the nine months ended September 30, 2012, CSC Holdings was party to several interest rate swap contracts with an aggregate notional amount of $2,600,000 that effectively fixed borrowing rates on a portion of the Company's floating rate debt.  These contracts were not designated as hedges for accounting purposes and matured in June 2012.

The Company has also entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock.  The Company has monetized all of its stock holdings in Comcast Corporation through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock.  At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity.  These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.

The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the condensed consolidated balance sheets at September 30, 2012 and December 31, 2011:

       
Asset Derivatives
    
Liability Derivatives
  
Derivatives Not
Designated as
Hedging Instruments
  
Balance Sheet
Location
  
Fair Value at
September 30,
2012
    
Fair Value at
December 31,
2011
    
Fair Value at
September 30,
2012
    
Fair Value at
December 31, 2011
  
                             
Interest rate swap contracts
  
Current derivative contracts
   $ -     $ -     $ -     $ 55,383  
                                     
Prepaid forward contracts
  
Current derivative contracts
     -       -       91,863       19,840  
                                     
Prepaid forward contracts
  
Long-term derivative contracts
     6,157       18,617       32,492       3,141  
                                     
Total derivative contracts
   $ 6,157     $ 18,617     $ 124,355     $ 78,364  
 
 
18
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
The following represents the impact and location of the Company's derivative instruments within the condensed consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011:

Derivatives Not
   
Amount of Gain (Loss)
Recognized
    
Amount of Gain (Loss)
Recognized
  
Designated as
Hedging
Location of
Gain (Loss)
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
Instruments
Recognized
  
2012
    
2011
    
2012
    
2011
  
                           
Interest rate swap contracts
Gain (loss) on interest rate swap contracts, net
   $ -     $ 1,173     $ (1,828 )   $ (8,513 )
                                   
Prepaid forward contracts
Gain (loss) on equity derivative contracts, net
     (57,082 )     81,737       (184,413 )     38,856  
Total derivative contracts
   $ (57,082 )   $ 82,910     $ (186,241 )   $ 30,343  

Settlements of Collateralized Indebtedness
 
The following table summarizes the settlement of the Company's collateralized indebtedness relating to Comcast Corporation shares that were settled by delivering cash equal to the collateralized loan value, net of the value of the related equity derivative contracts for the nine months ended September 30, 2012.  The cash was obtained from the proceeds of new monetization contracts covering an equivalent number of Comcast shares.  The terms of the new contracts allow the Company to retain upside participation in Comcast shares up to each respective contract's upside appreciation limit with downside exposure limited to the respective hedge price.

Number of shares
     8,069,934  
         
Collateralized indebtedness settled
   $ (148,175 )
Derivative contracts settled
     (70,579 )
      (218,754 )
Proceeds from new monetization contracts
     248,388  
Net cash receipt
   $ 29,634  

NOTE 10.
FAIR VALUE MEASUREMENT

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable.  Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions.  The fair value hierarchy consists of the following three levels:

 
·
Level I - Quoted prices for identical instruments in active markets.
 
·
Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
 
·
Level III - Instruments whose significant value drivers are unobservable.
 
 
19
 
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
(In thousands, except share and per share amounts)
(Unaudited)
 
The following table presents for each of these hierarchy levels, the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis at September 30, 2012 and December 31, 2011:

At September 30, 2012:
                        
   
Level I
    
Level II
    
Level III
    
Total
  
Assets:
                        
                         
Money market funds
   $ 395,564     $ -     $ -     $ 395,564  
Investment securities
     128       -       -       128  
Investment securities pledged as collateral
     768,254       -       -       768,254  
Prepaid forward contracts
     -       6,157       -       6,157  
                                 
Liabilities:
                                
                                 
Liabilities under derivative contracts:
                                
Prepaid forward contracts
     -       124,355       -       124,355  
                                 

At December 31, 2011:
                        
   
Level I
    
Level II
    
Level III
    
Total
  
Assets:
                        
                         
Money market funds
   $ 556,853     $ -     $ -     $ 556,853  
Restricted money market funds
     27,920       -       -       27,920  
Investment securities
     113       -       -       113  
Investment securities pledged as collateral
     509,234       -       -       509,234  
Prepaid forward contracts
     -       18,617       -       18,617  
                                 
Liabilities:
                                
                                 
Liabilities under derivative contracts:
                                
Prepaid forward contracts
     -       22,981       -